EUROMETAL: Distributors see global protectionism key risk for industry

The participants of EUROMETAL’s Central Europe Regional meeting of steel distributors on May 14-15 in Vienna addressed the problem of increasing value of steel by distributors and steel service centres (SSC), as well as the main challenges and opportunities the industry is facing now. The meeting was attended by more than 50 industry representatives from Central and Eastern Europe, including the producers and independent SSC and distributors.

Accessing the situation in the Central and Eastern European steel distribution during the meeting attended by Metal Expert participants agreed that the global protective measures currently pose a major threat to the European steel market. New EU safeguard measures, if applied, will reduce imports, thus aggravating the situation in the distribution sector in terms of supply balance, Metal Expert understands. All distributors and SSC are dependent on imports; they need imports in addition to the material they buy from the EU mills, otherwise they lose their competitive edge. “Independent distributors are back bone of the industry…We have solid function in the market…Yet, now there is a danger, not only in terms of AD cases…, now we have that safeguard investigation, which is a general attack on imports,” Ralf Reintjes, managing director of German trader Primex Steel and ISTA executive committee member, said. There has to be a healthy mixture between imported and EU-produced steel, which is hard to achieve in terms of ongoing AD cases, participants agree.

Some speakers believe that currently mills are better-positioned in the market than independent players, partly because of trade measures. “I don’t think independent SSC have such a bright future. We could see that during the AD procedures. There was a fight between integrated mills and independent SSC, and now it is really for the favour of integrated mills what we see in Europe at the moment,” Roland Fazekas, president of Hungarian stockholding company Carboferr, opined.

There was an opinion voiced during the discussion that independent steel distributors need a body to represent them in trade cases, like Eurofer for the mills. “We are simply to small…we need an independent body which can represent us in cases like safeguard investigation, AD cases, because such organizations have voice,” Ralf Reintjes added.

It is worth noticing that the EU launched a safeguard investigation into all steel imports, except for semis, from all origins, in a response to the US Section 232 case. This investigation is expected to have a major influence on flat steel products. Last year, steel imports volumes sent to the EU reached 29.4 million t, with flats constituting 69% of that volume, EUROMETAL director general Georges Kirps showed in his presentation. Even though the flats imports situation has stabilised since the imposition of safeguard measures in 2016-2017, overseas deliveries are not going down significantly. Lower shipments from the counties covered by AD measures have been offset by those from other regions. “Non-EU import flow changed by imports sources, owing to imposed AD measures,” Kirps said.

Sometimes, even the protective measures are not enough to fully stop imports, like in case with Russia that managed to increase HRC deliveries to Europe from 23,000 t in January-March 2017 to 420,000 in Q1 2018, despite the AD applied. “Certain Russian company, Severstal, has a low antidumping [rate] and runs SSC in Poland and Baltic region. So one of the explanations for that is increased deliveries mainly to Poland and Baltics for their own assets,” Kirps noted.

In a wake of increasing steel imports volumes to the EU in recent years competitiveness has become one of the key issues for the local steel market participants. For the EU distributors, the crucial differentiating factor from imports remains the range of services they can offer. From that point of view, the cooperation between mills and the SSC is essential for the steel market, especially, in the current situation, when there is no longer a clear split between the distributors’ market and the mills’ market. “Now mills just go directly to our customers, it’s complete chaos,” a European distributor told Metal Expert.

At the same time, distributors are more flexible than mills as they buy material from different sources and can deal with small tonnages which mills usually don’t do. “Mills will never be able to provide the same level of services as SSC,” Gabriel Holub, sales manager at U.S. Steel Kosice said during his presentation. The sustainable cooperation between mills and distributors can increase value of steel supply chain. “As the largest integrated mill in the Central Europe and without our own distribution network, the cooperation with SSC is a natural part of our business,” he said.

Despite the mentioned risks, many participants agreed that prospects for independent SSC are rather optimistic. Among the advantages of distributors is their consistent approach to the market. A relative value that they apply to the customer as an independent SSC is probably greater than the mills would give. “We are more flexible to satisfy specific customer demands,” Garry Furey, general manager of Czech service centre Mi-King said. Apart from a range of services the mills cannot provide, the distributors can also handle small tonnages which mills would not deal with. These competitive strengths are putting the distribution sector in a good position in the steel market, Metal Expert understands.

Speaking of the main opportunities for independent SSC, the meeting participants addressed digitalization as one of the key competitive advantages for a short-term perspective. Launching online platforms allows them to achieve greater customer acquisition, cut costs, improve warehouse management and logistics routing, to increase value of a supply chain. “Digitalization is a first step towards Industry 4.0….In digitalization we see a huge potential, may be not now, but for the future – definitely,” Dr. Jan Moravec, member of the board of Ferona, mentioned during his speech.

“We are trying to standardize our processes and digitalize whatever we can in our organizations. We gain a lot of time in terms of customer service by applying automatized processes,” one of the participants said during the panel discussion. Besides, the participants mentioned that for the future prospects it is important for a steel distributor to offer its customers a wider range of material –  not only steels, but also a supplements, including plastics, aluminium etc. “If you have a full package of steel and supplement materials, for end-users, it’s also a value-added kind of service you can offer, which distinguishes your company from the others,” one of the distributors said.

EUROMETAL includes 18 national associations and represents interests of about 3,000 steel distributors and service centres. Among the upcoming regional events organized by EUROMETAL is SSC Meeting Southern Europe in Barcelona on June 28. The meeting will address the ways SSC can enhance the value chain of steel, key challenges and opportunities the independent SSC in Southern Europe are facing now.